No, you can't say that. If you have [tex]\frac{1}{2}m_1 v_1^2 = \frac{1}{2}m_1 v_{f1}^2 + \frac{1}{2}m_2 v_{f2}^2[/tex] the most you can do is cancel out the 1/2s because there's no way you can cancel out the masses (or the squares).
You could say [tex]m_1(v_1^2-v_{f1}^2) = m_2v_{f2}^2[/tex]