Mail merge does not have the ability to manipulate merge fields in that way.

It would be possible to write a macro that modifies the data source to split
each of the merge fields containing the names on the space between the first
name and the last name so that you would have separate first name fields and
separate last name fields for each individual.

With a little bit of fiddling, that could also be done using the Convert
Table to Text and vice versa that is available in Word.

To do that, you would copy the column of names to a new document, Convert it
to Text, then use Convert it to Table to convert it back to a table,
selecting a space as a separator so that you then got a two column table,
then insert the necessary field names in the first row and then copy and
paste the two columns back into the original data source.