Here are a few ways to handle this issue:
  • Split the merge across a series of jobs that process sequentially
  • Add additional memory to the server(s)
  • Merge the content external to CRM in Microsoft Word
Because of the large number of variables that exist in Merge document complexity, list size, and server specifications; there is no one answer that fits all scenarios. Additionally, there are also limitations on what Microsoft Word can handle in a merge, as indicated in this Microsoft Knowledgebase article: