It turns out I almost had it right, but there was an issue in the generator expression in the custom target. As suggested here, I had to change the whitespace with $<SEMICOLON> So the add_custom_target becomes

add_custom_target(Merge${target}Libraries
        COMMAND libtool -static -o ${destination} "$<GENEX_EVAL:$<JOIN:${TARGET_DEPENDENCIES},$<SEMICOLON>>>"
        COMMAND_EXPAND_LISTS
        DEPENDS ${target})