pr00ne,
5(AC) Sqn is currently in service!
The 'rules' on seniority have been repeatedly broken over many years, either to secure a sensible long-term outcome or to meet senior officers' whims. A good recent example was the transfer of the II(AC) numberplate from the Tornado to Typhoon forces, which broke rules whether you looked at it as a disband - reform (in which case II(AC) should not have been disbanded as it was the most senior Tornado squadron at the time) or as a transfer of number plate away from a squadron which then continues under a different number (which is expressly prohibited). Playing by the rules would have brought 12(B) in as the fifth Typhoon squadron and consigned II(AC) to an uncertain fate at Tornado's retirement, so their airships quite sensibly fudged matters to secure II(AC)'s continuation on a long-term basis.
We'll see something similar with MPA, I'm sure. Seniority is not the only factor and there are guidelines to do with historic association with particular roles. The fact that 120 Sqn was presented with its standard early in recognition of its critical role in the Battle of the Atlantic (putting it in a very select group of sqns) is supposed to count, as well. If we were only going to get one MPA squadron, I would be steeled for a political argument over whether to go for 120 Sqn (probably the RAF's choice) or 201 Sqn (as a sop to the RN and the 200-series's RNAS legacy). My bet would be 2 squadrons instead.