The Magpies' second relegation from the Premier League in eight years was confirmed on Wednesday by Sunderland's 3-0 win over Everton.
"You have to say Mike Ashley hasn't handled the decision-making very well or he's given the responsibility to people and they haven't handled it very well," Keegan, 65, told BBC Sport.
Speaking before United's relegation was finalised, he said: "They are going to have to go down and regroup. That's not going to be easy.
"You make mistakes in football and you get punished, especially the Premier League now. I think they'll bounce back.
"It is mismanagement from the very top," he said. "They bought players for the future but sometimes maybe you have to buy players for the present.
"It's all right having a few good young players from France but can they play in the Premier League now?
"If they can't - don't buy them or certainly don't play them. A few of them have found it very tough and the confidence goes and then even good players start to look pretty poor."